Board composition, ownership structure and dividend policies in an emerging market: Further evidence from CASE 50

Abstract

Purpose

The purpose of this study is to examine dividend policies in an emerging capital market, in a country undergoing a transitional period.

Design/methodology/approach

Using pooled cross‐sectional observations from the top 50 listed Egyptian firms between 2003 and 2005, this study examines the effect of board of directors' composition and ownership structure on dividend policies in Egypt.

Findings

It is found that there is a significant positive association between institutional ownership and firm performance, and both dividend decision and payout ratio. The results confirm that firms with a higher return on equity and a higher institutional ownership distribute higher levels of dividend. No significant association was found between board composition and dividend decisions or ratios.

Originality/value

This study provides additional evidence of the applicability of the signalling model in the emerging market of Egypt. It was found that despite the high institutional ownership and the closely held nature of the firms, which imply lower agency costs, the payment of higher dividend was considered necessary to attract capital during this transitional period.

Citation

Abdelsalam, O., El‐Masry, A. and Elsegini, S. (2008), "Board composition, ownership structure and dividend policies in an emerging market: Further evidence from CASE 50", Managerial Finance, Vol. 34 No. 12, pp. 953-964. https://doi.org/10.1108/03074350810915879